Q: My first investment venture in 1979 was a bad one. I purchased a vacant lot, expecting to sell at a profit because it is in a progressively developing area. I do not seem able to sell. People deposit trash and debris for which the District inspectors have cited me. I am still paying off a small note to the mortgagee. Will I destroy my credit if I fail to pay and incur a forfeiture?

A: One of the hardest things for any investor to do is to recognize when it is time to "cut your losses."

You purchased the vacant land, and unfortunately because land cannot depreciate, you were unable to take any real tax benefits from that purchase. I assume, of course, that you were deducting the interest and tax payments each and every year.

I do not recommend that you let the property go to foreclosure. This will be a bad mark on your credit record, and will certainly affect your ability to obtain new loans in the future. Additionally, even if you let the property go to foreclosure, you have no guarantee that the property will sell for the amount of the loan, and it is possible that you will still be obligated for any deficiency--in other words, the difference between what you owe on the property and the amount the property sold for at the foreclosure sale.

For these reasons, I cannot recommend foreclosure.

Have you actively marketed the property? Although I have not seen your lot, generally speaking, land in the District of Columbia is--or should be--valuable. Perhaps you have not had qualified professional assistance in marketing the property. I recommend that you take time to find a competent real estate professional who understands the sale of vacant land and understands the area in which the property is located. Here is a situation where professional guidance really is needed.

Once your lender sees that you have taken active steps to list the property with a real estate professional, they may even be willing to work with you on the mortgage payments.

Perhaps you have set too high a price for the property. If you sit down and do some calculations, it may very well be that you can sell the property just for the amount of the note. While you would be taking a loss (which is tax deductible) at least you would not have to keep throwing good money after bad--by way of mortgage payments and real estate taxes. Additionally, I am sure that you have been seriously inconvenienced by the pressure of the D.C. inspector and this may be yet another reason to want to unload the property at any cost.

You might also want to consider donating the property to a charity, such as a religious organization or some other nonprofit group which would give you the right to obtain a charitable deduction. This is not an easy matter, and your tax adviser should be consulted before you proceed along this line.

Thus, perhaps it is time for you to cut your losses, while at the same time protecting your credit reputation.